Customer loyalty programs have been a mainstay of brand interactions with consumers through the decades. In the early days of customer loyalty programs, brands focused on their best customers and offered rewards to increase their share of wallet. For example, the American Airlines AAdvantage program was designed to motivate the 2% of customers who contributed 25% or more of the airline’s revenue to fly more on American and less on others.
From airlines to hospitality to retail and beyond, loyalty programs have expanded and shifted their goals over time. Today, brands can reach consumers across a variety of channels (including the internet, email, and social media) to start personalized relationships with the 20% of their customers who often account for 80% of their sales.
Today’s retail programs measure success by their ability to motivate the customer to return to the store sooner and more often (e.g., spend $50 or more this month and get $10 good for next month). And, increasingly, brands are letting customers earn points not just for their spending but also for engaging with the brand – striving for share of attention as well as share of wallet.
To support future business growth and make customer relationships more profitable, it is increasingly important that brands pivot their approach.
Why Many Point Programs Miss the Mark
While many companies see the value in having a loyalty program, the success of those programs varies. Statistics show the average U.S. consumer is a member of 16.6 loyalty programs but engages with less than half. Unreasonable hurdles or timelines to earn rewards, lack of clarification surrounding rules, and lack of system integration are common setbacks to program success.
How to Ensure Loyalty Program Success – Balance Program Design and Technology
Brands looking to synchronize their loyalty programs with the pace of progress should start with strategy and design to build a solid foundation. Technology can bring the program to life through systems integration and tools that connect with customers at the appropriate place, time, and frequency.
When consumers opt into a loyalty program, they make a conscious decision to share their personal information, transaction details, and engagement activities in exchange for value – which can be realized through earned rewards, benefits linked to status, and an elevated customer experience.
Accounts in the most successful customer loyalty programs mimic a bank account in that they are a very personal wallet of status and earned benefits. Like a bank account, the wallet should be securely integrated with all customer touchpoints in real-time, as well as adhere to aggressive system uptime and response time service level agreements.
Striking this balance between program design and technology requires the CMO and CIO to collaborate to set shared goals that deliver upon the brand’s core value proposition and translates into an elevated customer experience. It is a powerful collaboration between what a loyalty marketer should deploy and how it gets executed.
The Future of Customer Loyalty Programs
Future customer loyalty programs should focus on motivating customer behaviors using a variety of methods.
- Prioritize customer engagement: In the age of online reviews and endless options, brands are highly motivated to improve their customer experience. Rewarding loyal customers with exclusive treatment is one method of enhancing customer experience to build better relationships with top customers.
- Incentivize behavior: Brands should focus on customers’ share of attention as much as – if not more than – share of wallet. Prioritize incentives that influence consumer behavior, not just sales. Small incentives can change behavior, which adds up to incremental sales over time.
- Remove friction through innovation: Reward redemption can triple the customer’s lifetime value, driving incremental revenue. Leverage technology to make participating in a loyalty program and redeeming rewards a seamless experience for consumers and integrate new technologies like facial verification to further ease the transaction.
- Tighten incentives and measure progress: Customer loyalty programs should be straightforward, for both brands and their customers. Streamline programs to clarify incentives and their incremental impact. An accurate account of progress can help brands make correlations and budget adjustments with ease.
Once activated, brands need to measure the results of their customer loyalty programs and compare data to industry benchmarks to ensure that the structure aligns with long-term goals and delivers a competitive edge.
Shifting Goals for More Stable Customer Relationships
Brand loyalty is changing, but profitably changing consumer behavior continues to be the goal.
Brands that build their customer loyalty programs with innovation, customization, collaboration, and sustainability in mind are well-equipped to drive incremental sales and profits in 2023 and beyond.